Committee Reports > List of Committees > Dáil > 1954 > Committee of Public Accounts > Report - Appropriation Accounts 1952 - 1953

MIONTUAIRISC NA FINNEACHTA

(Minutes of Evidence)

Déardaoin, 4 Samhain, 1954.

Thursday, 4th November, 1954.

The Committee sat at 11 a.m.

DEPUTY SHELDON in the chair.

Liam Ó Cadhla (An tArd-Reachtaire Cuntas agus Ciste), Máire Bhreathnach, Mr. M. Breathnach, Mr. C. J. Byrnes, Mr. J. F. MacInerney and Mr. J. Mooney (An Roinn Airgeadais) called and examined.

VOTE 67—HEALTH.

Mr. P. Ó Cinnéide called and examined.

650. Chairman. — On subhead A.— Salaries, Wages and Allowances — the Supplementary Estimate was introduced for the purpose of debate?—Yes. The main Estimate had gone through without discussion in the earlier part of the year and there was an arrangement to introduce a Supplementary Estimate to enable a discussion to take place.

651. Chairman. — On subhead E.— Expenses in connection with International Congresses, etc. — the greater part of the amount provided goes to one organisation?—Yes, to the World Health Organisation.

Deputy A. Barry.—It is an annual contribution?—Yes. There is a small sum provided for the expenses of delegates attending the annual meeting of the organisation.

652. On subhead F.3.—Dissemination of Information and Advice on Health—how is the amount provided made up? Is a plan drawn up as to how much money should be spent?—I can give the Committee roughly the make-up of the amount granted, namely, £31,000. There is an amount of £5,000 provided for Press advertising; £4,500 for the showing of films in national schools—a service which is provided by the National Film Institute; £8,000 for the making of films; £100 for publicity on the radio; £4,000 for publications, small leaflets distributed from time to time; £500 for posters; £250 for stands at shows like the Spring Show; £250 for photography, the taking of photographs, mainly of the hospitals and institutions which are being erected under the building programme, for publicity purposes; then we also hire and purchase health films for showing, sometimes in commercial cinemas and sometimes in schools, the provision of this is £500; for advertising on public transport, including the advertisements displayed in buses and trains, £5,500; for advertisements in the portion of cinema programmes which is devoted to commercial advertising, £1,500; for trailer films, also shown in commercial cinemas, £800; and £100 for contingencies. These amounts total £31,000.

653. The reason for the whole amount not being spent was that some of this activity was not undertaken?—Partly for economy purposes and partly because in the case of some of the bigger items as, for example, in regard to the £8,000 provided in connection with the making of films, the charges do not come in regularly. The progress in the manufacture of a film is uncertain, and it is difficult to estimate in advance how much is likely to be payable during the year.

654. Deputy A. Barry.—I wonder if there is an all-over plan for this type of expenditure or if it is a haphazard activity?

Chairman. — Have you any means of determining what are the best methods of advertising?—Well, we endeavour to lay out the expenditure in a manner which we think will give the best return. It is not easy to determine in advance what will give the best results. A lot depends on what we are aiming at. For example, if there is a diphtheria scare or a smallpox scare, a considerable amount would be spent on newspaper advertising because it gets to the people quickly.

655. Deputy A. Barry.—Is there any technical advertising advice sought in connection with the problem of reaching the greatest number of the public in the most efficient manner?—We have a publicity officer in the Department, employed on a part-time basis, and we depend a good deal on him for advice in these matters.

Deputy A. Barry.—That is all right.

656. Chairman. — On subhead G.— Vaccine Lymph Supply—this money is recouped?—Yes, it nearly all comes back from the local authorities.

657. On subhead H.—Grants to Health Authorities—these grants are subject to final determination after audit?—Yes, 95 per cent. of the estimated expenditure is paid during the year and 5 per cent. is held over pending the completion of the audits by the Local Government auditor.

658. Are you able to have the audits completed as quickly as that?—We do not, but in fact we do not pay over all the 5 per cent. until the audit is completed. We keep back a sum to cover possible over-payments, and in any case we can always make an adjustment in subsequent years if there is any necessity to do so.

659. On subhead J.—Grants to Voluntary Agencies for Child Welfare, Schools for Mothers, etc.—what is the basis of these grants? Do you pay all the expenditure? — No. These grants are payable under three main heads, to district nursing associations, to boarding-out agencies and to homes for unmarried mothers. We pay on the basis of 50 per cent. of the approved expenditure of these organisations which is attributable to maternity and child welfare work only. There is a rather complicated method of arriving at that figure, but it is on the basis of 50 per cent. of their expenditure on this particular service.

660. Deputy Bartley.—On subhead L.— Grants in respect of Training of Native Irish Speakers in Hospital Nursing, including Training in Midwifery—is that the general scheme for the training of nurses?—It is a special scheme for girls recruited from the Gaeltacht only. There is a number of vacancies available each year. I think ten is the total number. Applications are invited from residents in the Fíor-Ghaeltacht.

661. The scheme is in operation for a long time. I saw a special reference to midwifery, and I thought there might have been some alteration?—There was no change in the scheme—at least, not in that year. The operation of the scheme has been terminated since then as far as the Department of Health is concerned.

662. It has been terminated? — It is now in the hands of An Bord Altranais. I do not know whether they are continuing it or not, but it has been handed over to them. That was since this account was closed.

VOTE 68—GENERAL REGISTER OFFICE.

Mr. P. Ó Cinnéide further examined.

663. Chairman.—Subhead A. relates to Salaries, Wages and Allowances. What exactly is meant by the note “Savings resulted from a reorganisation of the Office”?—We introduced more machinery and mechanised methods generally into that particular Office. That resulted in our being able to dispense with some staff and replacing them by more junior staff. It followed an inspection by the Organisation and Methods Officer in our Department, in collaboration with the Department of Finance.

The witness withdrew.

VOTE 50—INDUSTRY AND COMMERCE.

Mr. J. Leydon called and examined.

664. Chairman. — Subhead J.1. refers to Food Subsidies and paragraphs 59 to 62, inclusive, of the Report of the Comptroller and Auditor General refer to the matter. Paragraph 59 reads:—

“Subhead J.1.—Food Subsidies.

The expenditure on food subsidies charged to this subhead is made up as follows:—

That paragraph is for information. Paragraph 60, which is also for information, states:—

“The flour subsidy, paid to Grain Importers (Eire), Limited, was the amount required to control the price of flour and to regulate the earnings of the milling industry, which were limited to a percentage of an agreed figure representing capital employed together with the cost of any capital provided in excess of the agreed figure. The expenditure comprised £6,059,564 16s. 3d. in respect of losses incurred on the sale of imported wheat for periods up to 28 February, 1953, offset by £51,352, being the balance due from the company in final adjustment of subsidy for the cereal year 1948-49 following examination of the millers’ accounts by officers of the Department; payments on account amounting to £213,500, being £200,000 in respect of provisional adjustment of subsidy for the cereal years 1949-50 and 1950-51 and £13,500 for remuneration of importer-distributors for the 15 months to 31 March, 1951.”

Mr. Ó Cadhla.—I have nothing further to add.

665. Chairman.—Paragraph 61 of the Report of the Comptroller and Auditor General reads:—

“The subsidy on wheaten meal for the cereal year 1951-52 was paid to millers at varying rates representing the difference between the average cost of production, together with a profit of 2/6 per sack, and the controlled selling price”,

and paragraph 62 reads:—

“The subsidy on tea was paid to Tea Importers, Limited, and represented the difference between the cost price of tea plus overhead expenses and the selling price. Subsidy ceased to be payable as from 5 July, 1952, on the abolition of rationing. The audited accounts of the company for the period 1 April to 4 July, 1952, revealed, after taking into account the sum of £420,000 received from the Department of Industry and Commerce, a balance of £1,156 1s. 9d. due to that Department. I understand that this amount was received from the company in April, 1953.

The auditor, in his certificate appended to the accounts, indicated that the balance referred to had been arrived at after taking into account certain adjustments which had not been accepted by the Department and I have inquired regarding this matter.”

Have you anything to add to that, Mr. Ó Cadhla?

Mr. Ó Cadhla.—In arriving at the sum of £1,156 1s. 9d. shown in the accounts as due to the Department of Industry and Commerce in respect of excess subsidy, the company took credit for three sums amounting, in all, to over £81,000 which, it was claimed, were not built up out of tea subsidy. Over £45,000 represented the profit made in the period prior to rationing. Nearly £32,000 was accumulated——

Deputy A. Barry.—Prior to the cessation of rationing?

Mr. Ó Cadhla. — In the pre-rationing period. This company was operating prior to 1947.

Mr. Leydon.—Prior to the introduction of subsidy.

Mr. Ó Cadhla. — Yes, that would be more correct—prior to the introduction of subsidy. A sum of £32,000 was accumulated in the Marine Insurance Fund— the company carried its own insurance— and a sum of £3,900 was accumulated in the Indian Sales Tax Reserve Fund. The Accounting Officer informed me that following discussions with the company the Department accepted the view that the £45,000 which had been used to stabilise tea prices, subsequent to the abolition of subsidy, did not rank as excess subsidy payment, and was not, therefore, payable to the Exchequer. With regard to the other two amounts, it was agreed to allow them to stand until certain points regarding them had been cleared up. I might mention that Tea Importers, Limited, is a non-profit earning concern, but marginal profits and losses are unavoidable. In the years 1941 to 1947, over £200,000 had been issued from voted moneys to make good losses incurred by the company. Therefore, we thought it not unreasonable to expect that the profit of £45,000 made in this pre-subsidy period should be surrendered to the Exchequer.

666. Chairman.—Would you like to add anything to that, Mr. Leydon?—This is the sort of question on which there may very legitimately be differences of opinion and arguments may go on for ever about it. Tea prices vary considerably from time to time, that is, the prices at which Tea Importers, Limited, can buy in the auctions. We have always objected to the frequent changes in the selling price here. It is inevitable that, at times, Tea Importers, Limited, would make a profit, at other times a lesser profit and at other times again, a loss. It is a non-profit making company. When it winds up, the whole of the assets will go to the Exchequer. The company has a very responsible board of experienced businessmen who are skilled in the trade. They themselves feel, and strongly argue, that the best way to use these balances is to steady the prices in the home market; and we came to the conclusion, after a lot of discussion and consideration, that this was a reasonable approach. Therefore, we accepted the view that the £45,000— which was made before the introduction of the subsidy on the 1st November, 1947 —should be retained by the company for this purpose; I assume that, at the moment, you are concerned with the £45,000.

667. Chairman.—This profit was made by the non-profit making body. Did they ask for sanction to use the £45,000 in the way they did?—No.

668. They did that on their own?—We would expect them, in the ordinary course of the conduct of their business, to keep the prices steady. I think the important thing in which we would take an interest would be the price at which they released tea to the trade and, eventually, to the consumer. We try to keep it steady. If that is to be done, they must have balances from time to time. In so far as these are credit balances, it is a profit but, by keeping the price steady over a period, that balance might come down and disappear.

669. What exactly happened the £45,000? Is there any clear picture as to how it was used to stabilise prices and over what period, and further can you say how much tea was represented?— They used it after the abolition of the subsidy in July, 1952. It was, in fact, used for that purpose.

670. Could it be demonstrated to the satisfaction of the Department that this £45,000 had a material effect on the price of tea to the consumer? — It would be quite impossible to demonstrate that to anybody’s satisfaction. It is impossible to follow the £45,000. The average consumption of tea is about 24,000,000 lbs. per annum. We could never hope to satisfy ourselves that the whole of the £45,000 was passed on to the consumer. As far as Tea Importers, Limited, are concerned, it goes to the trade. It should be a deterrent against any suggestion for increasing the price of tea.

671. I appreciate that. My point is that, in the ordinary way, if there had not been fluctuations in the price of tea, the Exchequer might reasonably have expected to get that £45,000 back in some way, as they have to make good the losses at other times. That did not happen. It was used to stabilise the price of tea in some way. I would take a different view if I thought the £45,000 had a different effect on the consumer prices than if the £45,000 merely went into the pockets of those distributing tea. Have you anything to say on that, Mr. Leydon?—It was on the assumption and in the belief that the benefit of this would go to the consumer that we left Tea Importers, Limited, to deal with the matter in the way they did. They are doing that sort of thing. The £45,000 is a figure which happens to be the balance on a particular date. The figure would vary from time to time: sometimes it would be substantially higher and sometimes it would be substantially lower.

672. Deputy Bartley. — Over what period was the £45,000 accumulated? Is it not a profit?

Chairman.—The period extended from the setting up of the company until the subsidy was introduced.

Mr. Leydon.—Yes—until October, 1947. It was prior to the introduction of the subsidy.

673. Chairman. — How many months, Mr. Leydon?—It covered a period from July to October, 1947.

674. Deputy Bartley. — Is it not an accepted fact that whatever profits this company might make would eventually be returned to the Exchequer on the winding-up of the company? Are we not now arguing as to the point of time at which whatever sums they have to their credit will be turned over to the Exchequer?

Chairman.—No. This £45,000 has disappeared. It has already been used for another purpose.

675. Deputy Bartley. — I understand that Tea Importers, Limited, was set up to deal with a difficult tea supply problem. I take it that they were given carte blanche to ensure that we would get our supplies of tea. It seems to me unreasonable, therefore, that we should query a balance in their favour. We expect them to operate as people with an intimate knowledge of this business. It is quite obvious that Tea Importers, Limited, have to make purchases and that they require a fair amount of money at their disposal from time to time to take advantage of favourable market conditions.

Chairman. — The Deputy misunderstands one point. I am not judging them. I am seeking evidence on which to judge. I want a clear picture.

Deputy Bartley.—What are you judging? I have intervened because my ideas are hazy. Perhaps the other members understand it better than I do.

Chairman.—I am trying to get a clear picture of what Tea Importers, Limited, did.

676. Deputy A. Barry.—I am satisfied that what happened is quite in order, and it is really only a flea-bite in comparison with the transactions of this organisation. I would like to know how careful and close the check is, what are regarded as the normal overheads of that company and what would be regarded as a non-profit making set-up. They import and distribute tea. I want to know what does that activity cost.

677. Chairman. — Their balance sheet would tell you that. The balance sheet of this company will be before the House? —It is audited by the Comptroller and Auditor General, but I cannot say whether it is laid before the House. It is very important to bear in mind always that this is a figure which was accumulated before the payment of the Exchequer subsidy. There is not a penny of taxpayers’ money in it.

678. Chairman.—I think the picture is clear now unless any member has a query.

Deputy Bartley.—Here is what I would like to have established. Is it a fact that Tea Importers, Limited, are presumed to operate as a business undertaking?

Mr. Leydon. — That is correct. This raises a very big question regarding the control of and extent of interference with State-sponsored bodies generally. Broadly the theory is that we appoint a Board of responsible businessmen and we do not interfere with the day-to-day administration, the ordinary things a Board would handle. We do not interfere except perhaps on questions of buying policy for example; whether they want to buy 20,000,000, 24,000,000 or 26,000,000 lbs. of tea in a particular year. We leave the question of overheads, the staff they employ, and other such matters to them. A little reflection will show that it would be a hopeless task to try to run a business if a Government Department wanted to interfere. There would be very great difficulty in getting the sort of businessmen we want if Government Departments interfered in day-to-day administration.

679. Chairman.—I take it you have inquired into this matter of the £45,000, and you are satisfied?—Yes.

680. Then the other two balances have yet to be determined?—Yes. The Indian Sales Tax Reserve Fund may yet be the subject of legal proceedings, and we decided to leave it there. The question of the Marine Insurance Fund is still under consideration, at times a little heated and at times a little calmer, between the Department and the Tea Importers’ Board, and no doubt it will eventually come before the Comptroller and Auditor General again. We have not been able to agree up to the present what is to be done with that.

681. Paragraph 63 of the Report of the Comptroller and Auditor General reads:—

“Subhead J.2.—Remission of Penalties.

Millers who mill wheat in excess of the quotas allotted under the Agricultural Produce (Cereals) Acts, 1933 to 1939, are liable under Section 30 (1) of the 1933 Act, as amended by Section 9 of the 1934 Act, to pay to the Minister for Industry and Commerce certain penalties calculated on an ascending scale according to the quantity overmilled.

As stated in a note to the account, penalties totalling £19,056 14s. 11d. for the cereal year 1951-52 have been waived with the sanction of the Department of Finance, the quotas laid down having been exceeded by direction of the Minister for Industry and Commerce. The remission of these penalties was brought to the notice of Dáil Eireann by the inclusion in the Estimate of a token provision of £5.”

That is for information?

Mr. Ó Cadhla.—Yes.

682. Chairman.—Paragraph 64 of the Report of the Comptroller and Auditor General reads:—

“Subhead L.2.—Compensation for Mineral Rights acquired.

The mineral rights in the Slievardagh coalfield were acquired by the Minister for Industry and Commerce on 6 February, 1941, by virtue of the Minerals Acquisition (Slievardagh Coal-field) Order, 1941. As agreement could not be reached on the amounts payable by way of compensation to the former owners the matter was referred to the Mining Board whose awards were issued on 22 November, 1952, and 22 December, 1952. The amount of £4,824 5s. 11d. charged to this subhead represents portion of the compensation, interest and legal costs payable under these awards. Further sums amounting to £3,576 which remained due at 31 March, 1953, were paid in the financial year 1953-54. One award was based on a royalty of 6d. per ton on all coal raised from the coalfield from the date of acquisition, the amount paid being in settlement of the royalty up to 1 February, 1953.”

That is for information?

Mr. Ó Cadhla.—Yes.

683. Chairman.—Paragraph 65 of the Report of the Comptroller and Auditor General reads:—

“These mineral rights were leased by the Minister to Comhlucht Gual-láthrach Sliabh Árdachadh, Teoranta, as from 1 May, 1942. The assets and liabilities of this company were transferred to Mianraí, Teoranta, on 1 June, 1945, under the provisions of the Minerals Company Act, 1945. The property was sold by Mianraí, Teoranta, with effect from 2 February, 1953, and the sale agreement provided that the clause in the lease, which had reserved to the Minister a royalty of 3d. per ton on coal, should be amended to require the purchaser to pay a royalty of 9d. per ton on the first 450,000 tons of coal raised and of 6d. per ton on any excess over that figure.”

I do not quite follow something here in regard to royalties. Will this, in fact, mean that the Minister will have a net income of 3d. per ton? He is paying 6d. out under the award and getting 9d.?—I do not know whether you consider that a fair question, but that is the position for the particular quantity of coal covered by the 9d.

684. That is for one particular mine? —Yes.

685. Chairman.—Paragraph 66 of the Report of the Comptroller and Auditor General reads:—

“Subhead L.4.—Advances to Mianraí, Teoranta.

The sum of £16,614 was advanced to Mianraí, Teoranta, in connection with Slievardagh coalfield out of a sum of £21,000 provided by Supplementary Estimate. The amount of the advances to the company under Section 3 of the Minerals Company Act, 1947, as amended by Section 2 of the Minerals Company (Amendment) Act, 1950, was limited to £88,000 and this limit had been reached by 31 March, 1952. A note to the Supplementary Estimate indicated that payments would be made out of the subhead in excess of the limit specified in these statutes, a Bill for the amendment of which would be introduced in Dáil Éireann at the earliest date possible. In reply to my inquiry regarding the proposed legislation I was informed that as the company’s interest in the Slievardagh coalfield had been sold no further advances would be required for work in that area and the only purpose of legislation would be to regularise the payment of the sum of £16,614. The Minister considered that it would not be appropriate to introduce legislation solely for that purpose and he proposed, at a later stage, to seek the approval of Dáil Éireann to treat the advance as a non-statutory free grant either by way of provision in the original Estimate for the Vote or by a special Supplementary Estimate, and the Minister for Finance agreed to these proposals.”

What was the sale price and how was it disposed of? — I have some hesitation about answering that because the deal has not been completed for reasons outside our control. Otherwise I would have no objection to giving the figure.

686. Perhaps you would prefer to wait and send the figure along afterwards?— I would like to consider whether there is any objection.

687. It might be better to wait until the arrangement is completed?—The completion of the arrangement has been held up by the necessity to complete legal formalities and partly by the necessity to deal with one man who had been promised a sub-lease before the contract for sale was made. He had to be dealt with because the purchaser refused to take on that particular liability. That has been largely responsible for the delay.

688. There is no immediate hurry about it?—Half the purchase price has been paid in cash already.

689. You cannot very well tell us what you got or we would know what the purchase price was. Has this procedure in the Dáil been carried out to regularise the payment of the £16,614?—Not yet, of course. We must wait for the completion of the deal before that can be done.

690. I am talking about the £16,000 which was voted over and above the statutory limit? There is a reference by Mr. Ó Cadhla to the Minister bringing in an Estimate?—Yes, a Supplementary Estimate. The intention was that when the formalities of the sale were completed, that would be done and the Minister would explain the position to the Dáil in a statement on the Supplementary Estimate.

691. Deputy Bartley.—Can the sum of £16,000 be deducted from the sale price?

Chairman.—I think that will have to arise when the Supplementary Estimate comes.

692. Paragraph 67 of the Report of the Comptroller and Auditor General reads:—

“The total liability of the company for advances and for interest thereon, including the sum of £16,614 referred to above, amounted at 31 March, 1953, to £199,623 2s. 6d. In exercise of the powers conferred by Sections 11 (2) and 12 (3) of the Minerals Exploration and Development Company Act, 1941, and Section 8 (2) of the Minerals Company Act, 1945, the Minister for Industry and Commerce, with the consent of the Minister for Finance, agreed to the postponement to 1 April, 1953, of the payment by the company of interest on advances and of the repayment of instalments of advances which fell due on 1 April and 1 October, 1952.”

All of these advances are repayable ones?—In theory, yes, but I am afraid the whole of the advances will have to be written off. I might mention for information that the amount outstanding for advances and accrued interest at 31st March, 1954, was £206,172.

693. You say “written off”. I presume the Exchequer will have to be recouped and that it will be done by way of Supplementary Estimate? These are advances from the Central Fund. Surely they will have to be made good?—I hesitate to answer that question. I think it could be done under the powers in these sections that are quoted. I think there is power in the Act to do it without a Supplementary Estimate. If you really want a definite answer, I would like to be given time to look it up and send on the information.*

Chairman. — Very good, that would clear the point.

694. Chairman.—Paragraph 68 of the Report of the Comptroller and Auditor General reads:—

“Operations of Bord na Móna. Subheads M.1., M.2., M.3. and M.4.

The issues from the Grants-in-Aid during the year comprised £26,000 for experiment and research (subhead M.1.), £20,000 for publicity and marketing (subhead M.3.), £30,600 for grants for housing (subhead M.4.) and £324,240 for cost of turf production under local schemes (subhead M.2.). Production under local schemes was confined to machine-won turf and receipts from Bord na Móna in respect of sales amounted to £107,350 which is credited to subhead V.—Appropriations in Aid.”

Mr. Ó Cadhla.—That is for information only.

695. Chairman.—Paragraph 69 of the Report of the Comptroller and Auditor General reads:—

“Section 52 of the Turf Development Act, 1946, as amended by Section 2 of the Turf Development Act, 1950, provides for the payment out of voted moneys of grants towards expenses incurred by Bord na Móna on experimental and research work, subject to a limitation of £250,000. The issues under this head amounted at 31 March, 1953, to £179,800.”

That looks as if you are getting near your limit? — The limit was raised to £250,000 under an Act of 1950.

696. Up to the 31st March, 1953, £179,800 had been advanced?—Yes, Sir, that is right. We advanced £20,000 in 1953-54 and £10,000 this year up to date, making a total of £214,000.

697. I hope that if necessary you will introduce further proposals for legislation before you go beyond the limit. We do not want history to repeat itself?—I will keep that in mind.

698. Chairman. — Paragraph 70 of the Report of the Comptroller and Auditor General reads:—

“Section 6 of the Turf Development Act, 1950, provides for the payment to Bord na Móna of grants of such amounts as the Minister for Industry and Commerce, with the consent of the Minister for Finance, may fix, towards the expenses incurred by the Board under approved schemes for the building of houses for occupation by servants of the Board. This section limits the grant payable for each house to £180 and the total amount of the grants to £360,000. The issues to 31 March, 1953, amounted to £84,600.”

699. Chairman.—Paragraph 71 of the Report by the Comptroller and Auditor General reads:—

“The Exchequer extra receipts include a sum of £12,963 17s. 2d. received from Bord na Móna as interest to 31 March, 1952, on advances made from voted moneys for the development of certain bogs. The amount outstanding at 1 April, 1952, in respect of these advances was £261,713 2s. 8d. and, with the agreement of the Minister for Finance, this amount is being repaid by means of an annuity over a term of 25 years, interest being calculated at 5 per cent. The first half-yearly instalment of this annuity, £9,227 9s. 11d., which fell due on 1 October, 1952, is also included in the Exchequer extra receipts.”

This, I presume, is one of those subjects which is in a state of flux. Has any new decision been made? The last decision was to pay out of the funds money without funding?—I am wondering, Mr. Chairman, whether you are thinking of rural electrification. There has not been a change in this one.

700. Chairman.—Paragraph 72 of the Report of the Comptroller and Auditor General reads:—

“Subhead P.—Repayment of Advances for Rural Electrification.

Section 41 (3) of the Electricity (Supply) (Amendment) Act, 1945, provides that one moiety of the moneys advanced out of the Central Fund to the Electricity Supply Board for rural electrification shall be repaid out of moneys provided by the Oireachtas at such time or times as the Minister for Finance shall direct. The moiety of advances made in the calendar years 1947 and 1948 was, in accordance with the direction of the Minister for Finance, repaid from the Vote for Industry and Commerce to the Central Fund in the financial years 1948-49 and 1949-50, respectively. The subsidy portions of the advances for the calendar years 1949 and 1950 are, by direction of the Minister, being repaid from voted moneys by annuities over a term of 50 years, interest being calculated at 3¼ per cent. The first instalments were paid in the financial years 1950-51 and 1951-52, respectively.

In the year under review the Minister for Finance decided to revert to the earlier procedure whereby the subsidy moiety of advances in a calendar year is repaid to the Central Fund from voted moneys in the financial year commencing on the following 1 April. The sum of £504,809 11s. 0d. charged to this subhead comprises annuities of £25,374 16s. 0d. and £29,434 15s. 0d. in repayment of the subsidy moiety of advances made to the Board in 1949 and 1950, respectively, and £450,000 being one-half of the amount advanced during the calendar year 1951.”

Have you anything to say on that?

Mr. Ó Cadhla.—I have no comment to make.

Chairman.—We will not ask any questions tempting as it may be.

Mr. Leydon.—Thank you.

701. Chairman.—Paragraph 73 of the Report of the Comptroller and Auditor General reads:—

“Subhead U.—Trade Pavilion at Frankfurt.

The charge to this subhead includes £8,222, being the cost of erection of the Irish National Pavilion at the Frankfurt Trade Fair, and £147 for miscellaneous expenses, including maintenance of the pavilion. The balance of £1,024, represents the rent of the site for the Autumn, 1952, and Spring, 1953, fairs. A sum of £1,759 was received from exhibitors for display space and has been credited to subhead V.— Appropriations in Aid.”

702. Chairman. — Let us now turn to the Vote itself. I think we might take the subheads in groups. The first group from subhead A. to subhead H. deals with administration, etc.

Deputy Bartley.—Why is there such a large drop in the expenditure on salaries, wages and allowances?

Chairman. — You will see a note on page 144 explaining the variations.

Deputy Bartley.—That is all right.

703. Chairman. — The group dealing with Minerals Development — subheads L.1. to L.4.—has been dealt with by the Comptroller and Auditor General so also has the group covering the Operations of Bord na Móna—subheads M.1. to M.4.

Deputy A. Barry.—With regard to the Institute for Industrial Research and Standards, subhead 0.3.—Grant towards the Cost of Land, Buildings an Equipment—I take it that the initial expenditure has only begun?

Mr. Leydon. — Subhead 0.3. is explained in the notes at the end. It concerns the difficulties in connection with the placing of orders. It is merely the postponing of expenditure.

704. Chairman. — I take it that you pay these grants to the organisation on certified accounts? They are not under your direct control?—No. They are not under our direct control. There is almost unceasing discussion about the question of control over that body, and whether we should interfere with the salary scales paid to the staffs. Grants are payable under statute actually.

705. Chairman. — With regard to subhead S.—Córas Tráchtála, Teo. (Grant-in-Aid)—was this the first year of operation?—Yes. It was the first year.

Chairman. — If there are no further queries let us turn to the next Vote.

VOTE 51—TRANSPORT AND MARINE SERVICES.

Mr. J. Leydon further examined.

706. Chairman.—Paragraph 74 of the Report of the Comptroller and Auditor General reads:—

“Subhead A.1.—Payments in respect of Steamer Services.

Under the terms of a settlement dated 9 July, 1951, with the Galway Bay Steamboat Company, Ltd., which was subsequently made a Rule of Court, the Minister for Industry and Commerce agreed, in consideration of the transfer to him of the s.s. Dun Aengus together with the other assets of the company, to discharge the debts due by the company as at 5 July, 1951, and to pay an amount equal to 2/6 in the pound on its paid-up capital. The Minister, with the approval of the Minister for Finance, subsequently agreed to meet any further debts properly incurred by the company on the Galway-Aran steamer service between 6 July and 3 August, 1951, the date from which its operation was undertaken by Córas Iompair Éireann.

The amount of £5,148 9s. 11d. charged to this subhead comprises £4,595 13s. 8d. paid to the company’s creditors, £402 16s. 3d. in respect of the paid-up capital of £3,222 10s. 0d. and £150 towards legal costs. A sum of £508 17s. 2d. collected from the company’s debtors has been credited to Appropriations in Aid.

As stated in a note to the account, s.s. Dun Aengus was, with the approval of the Minister for Finance, transferred to Córas Iompair Éireann in November, 1952, for a nominal consideration.”

Mr. Ó Cadhla.—That is for information only.

Chairman.—This is the final clearing up of this matter?

Deputy Bartley.—Who took the matter into court, Mr. Chairman.

Chairman.—Will you give us some information on this matter, Mr. Leydon. The Deputy wants to know who took the matter into court.

Mr. Leydon.—It never actually reached the court.

707. Chairman.—This is just a way of doing it. The company was in liquidation?

Mr. Leydon. — It was a matter of tactics. The position was that the Department was advised they had legal rights by reason of the agreements. The company refused to recognise these rights and we initiated proceedings. It never went to court.

708. Chairman.—Paragraph 75 of the Report of the Comptroller and Auditor General reads:—

“Subhead A.2.—Córas Iompair Éireann.

The total amount paid to Córas Iompair Éireann in the year 1952-53 by way of non-repayable grant towards the operating losses and revenue charges of the Board was £1,923,000. This amount includes a sum of £450,000 in respect of losses incurred in the year ended 31 March, 1952, in excess of the subsidy of £1,817,000 paid in that year, and £1,473,000 in respect of the losses incurred in the year ended 31 March, 1953, excluding interest on transport stock.

The charge to this subhead also includes a sum of £477,000 which was repaid to the Central Fund in recoupment of the amount advanced to Córas Iompair Éireann in the year ended 31 March, 1952, in accordance with Section 30 of the Transport Act, 1950, to meet payments of interest on transport stock.”

Mr. Ó Cadhla.—That is for information only.

709. Chairman.—Paragraph 76 of the Report of the Comptroller and Auditor General reads:—

“Subhead A.3.—Great Northern Railway Company (Ireland).

Reference was made in paragraph 66 of the previous report to the agreement reached between the Minister for Industry and Commerce and the Minister of Commerce, Northern Ireland, regarding the payment and apportionment of the operating losses of the Great Northern Railway Company (Ireland). The sum of £344,999 7s. 5d. was paid to the company towards operating losses and revenue charges for the year ended 31 March, 1953, on the understanding that on the final determination and apportionment of the loss incurred in that year any excess payment found to have been made would be refunded by the company.

It was decided that the apportionment and adjustment of the losses of the company for the period 1 January, 1951, to 31 August, 1953, the last day of the operation of the service by the company, should be deferred until the accounts and a financial statement covering that period were available. I am informed that these have now been examined and that the question of apportionment and adjustment is under consideration.”

Have you anything to add to that Mr. Ó Cadhla?

Mr. Ó Cadhla.—No. I have no later information.

710. Chairman.—Has the matter proceeded any further, Mr. Leydon?—Yes, Sir. Considerable progress has been made and there are just a few comparatively small points outstanding.

711. Chairman.—Presumably they will be dealt with by the Comptroller and Auditor General?—They will be subject to his examination later on.

712. Chairman.—Paragraph 77 of the Report of the Comptroller and Auditor General reads:—

“Subhead A.5.—Sligo, Leitrim and Northern Counties Railway Company.

The grant of £3,500 provided by Supplementary Estimate was made to the Sligo, Leitrim and Northern Counties Railway Company to cover the cost of implementing, as from 1 January, 1952, a wage increase recommended by the Labour Court, and towards other revenue charges.”

As there are no questions, we will pass to the Vote itself.

713. Deputy Mrs. Crowley. — On subhead L.1. — Salaries, Wages and Allowances—has the vacancy for Superintendent been filled?

Mr. Leydon.—I understand it has been filled now.

Chairman. — If there are no other queries on that Vote, we will turn to the next Vote.

VOTE 52—AVIATION AND METEOROLOGICAL SERVICES.

Mr. J. Leydon further examined.

714. Chairman.—Paragraph 78 of the Report of the Comptroller and Auditor General reads:—

“Subhead E.—Acquisition of Land, Buildings, etc.

Reference was made in paragraph 67 of the report on the accounts for 1951-52 to the compulsory acquisition in 1945 of 23 holdings comprising 242 acres in connection with a scheme, which was subsequently abandoned, for the establishment of a village settlement in the vicinity of Shannon Airport. The reconveyance of these lands to the former owners has not yet been completed.

Payments out of subhead E. on foot of compensation, legal costs and land annuities in connection with this project amounted to £249 2s. 3d., while a sum of £54 13s. 6d. for rates on lands not yet reconveyed was paid out of subhead F. The net expenditure on the scheme to 31 March, 1953, was £5,008 14s. 5d., including £329, the cost of a holding of 2 acres required for the airport water supply scheme.”

Mr. Ó Cadhla.—I have nothing further to add.

715. Paragraph 79 of the Report of the Comptroller and Auditor General reads:—

“A sum of £28,368 7s. 9d. was expended on the acquisition of land for the development of Dublin Airport. This sum represents compensation moneys and part of the legal costs in respect of seven holdings of a total area of 133 acres. The acquisition of three other holdings comprising 155 acres was not completed at 31 March, 1953. As agreement on the amount of compensation could not be reached with all the landowners, arbitration proceedings were instituted under the provisions of the Air Navigation and Transport Act, 1936, and the Acquisition of Land (Assessment of Compensation) Act, 1919. Owing to certain ambiguities in the arbitrator’s award a test case was submitted to the High Court and the costs, amounting to £249 12s. 9d., are included in the charge to this subhead.”

Would you like to expand that a little, Mr. Ó Cadhla?

Mr. Ó Cadhla.—As far as I remember, I think the Department lost the case.

Mr. Leydon.—I think the Department took the view—and presumably were so advised by our legal advisers—that the arbitrator’s award gave the Minister the right to a clear title. Therefore, the onus was on the late owner to redeem the land purchase annuity. It was not possible to reach agreement on that with the owner, as presumably his legal advisers took the contrary view; we took a test case to the courts and lost.

716. Deputy Bartley. — The arbitrator held that the seller should redeem the annuity—was that the point?

Chairman.—No. The arbitrator’s award was not clear on that point.

Mr. Leydon. — The arbitrator’s award was not as clear as it might be and the only way to settle it was to take the case to the courts. The court held in effect that the redemption of the land purchase annuity was something that had to be taken care of by the Minister on the acquisition rather than deduct it from the purchase price which the arbitrator awarded.

717. Chairman. — Have you acquired the other three holdings referred to?— There is one where the county council is involved and the purchase of that one has not yet been completed.

718. Deputy Bartley. — Arising from the decision of the High Court in the matter, did the arbitrator, in assessing the value, award the full market value of the land? I ask the question because it seems to me that in all other transactions about land it is either implicit or explicit that the seller redeems the outstanding annuity.

Chairman. — That is apparently the advice which the Department received in this case.

Deputy Bartley.—That seems to me to be the normal practice and if in fact the full market value was awarded by the arbitrator and it was subsequently decided that the purchaser should also redeem the annuity, it seems there was a value placed on the land in excess of what is the normal practice in such transactions.

Chairman.—I am afraid I cannot answer your question. That has been settled by the High Court.

Deputy Bartley.— No, but I think it is a point worth mentioning.

Chairman.—If the Department had any doubt, there are higher courts.

719. Deputy J. Brennan. — Does the Deputy mean that the court did not take into account the redemption of the annuity?

Chairman.—That was what was before the court. That was the issue.

720. Deputy Bartley.—Did the arbitrator fix the price assuming that the land was not subject to any charge?

Chairman.—That is what the court found he did not do. We cannot very well start querying decisions of the High Court. We have not got the evidence which was before the court.

Deputy Bartley.—I only wanted to find out what the set of facts was in this case.

Chairman.—Well, the two litigants disagreed about facts.

721. Deputy Bartley.—I am sure there could not be any disagreement about facts. I think that if the seller was asked if there was any money due to the Land Commission in respect of this land, I am sure he would answer the question truly and say that there was so much due. It seems to me that was the question which should obviously have been asked and I am sure it was asked. Suppose you applied for a division of your holding and wanted to sell one acre for a site, the Sub-division Branch of the Land Commission would probably grant your application. You would have to submit a map showing the portion to be detached and the condition precedent is that you redeem the annuity on that portion and then you could go ahead and sell the site to the prospective purchaser.

Chairman.—Of course, but I do not see what it has got to do with us seeing that the High Court has settled the matter.

Deputy Bartley.—I agree, but it seems to me it is a matter worth noting.

Chairman.—It was just a matter of resolving the ambiguity in the arbitrator’s award and presumably the High Court has already probed into it.

Deputy Bartley.—I was just commenting on your statement, Mr. Chairman, of what the High Court did. You said the High Court decided that the purchaser should pay the land purchase annuity——

Chairman.—That is what the Accounting Officer said.

Deputy Bartley. — The Accounting Officer is telling the Committee through you—is that not so?

Chairman.—I do not know anything about the case.

Deputy H. P. Dockrell.—I think the statement was made by the Accounting Officer.

Mr. Leydon.—Yes, it was made by me. I am just wondering if there is any misunderstanding. What was in dispute here was the capital value of the land purchase annuity.

722. Deputy Bartley. — Does it now emerge that it was merely arrears of annuity?

Mr. Leydon.—No, it was redemption.

Chairman.—The court apparently held that the arbitrator’s award meant that the Department had to pay the full amount of the award without any reduction in respect of the land purchase annuity. It does not say that would cover all cases.

Deputy Bartley.—With all respect, the practice of judges is to follow precedent. I think arbitrators should take note of it in assessing the value of land acquired for these or similar purposes. They can now know that if a case is taken to court their assessment of value of the land will not take account of any moneys outstanding in respect of purchase annuities and that that also will have to be paid.

Chairman.—Possibly, but it is not a function of this Committee to inform arbitrators about anything.

Deputy Bartley.—With all respect, this is a Committee on public finance.

Deputy H. P. Dockrell.—I think the Deputy misunderstands. The function of the High Court in this case was to clear up the ambiguity in the arbitrator’s award. Having read the award, they decided that the purchaser should pay the annuity.

Deputy Bartley. — That is perfectly understandable and I started off from that point.

Deputy H. P. Dockrell.—But they did not change the normal procedure which is that the vendor should pay.

Chairman.—That is what I am trying to point out. This only arose out of a particular arbitration award. It does not affect all arbitration awards—it was only this particular one.

Deputy J. Brennan.—There may be a precedent established.

Chairman.—There may be, but I do not see how it affects this Committee. The matter can be raised in the Dáil if the Deputy wishes. It is not a matter for this Committee.

Deputy Bartley. — Possibly you are observing very strictly the rules under which this Committee functions.

Chairman.—I have every intention of doing so, Deputy.

Deputy Bartley.—You are to be congratulated on that, but surely the Dáil does rely on this Committee to advise it——

Chairman.—On public matters.

Deputy Bartley.—On our examination of the expenditure of public money.

Chairman. — Yes, but not a normal transaction as between a vendor and a purchaser of land. What happens the land annuity is none of the State’s business at all, so long as somebody pays it. The State is not interested in who pays it and I do not see how it makes any difference to the State. I do not see how an arbitrator’s award in respect of the sale of land where a land annuity is involved is any concern of ours. There is no State money concerned. I must rule on that and stop the discussion at that point.

Deputy Bartley.—Do I understand you to say that in the acquisition of this land there was no State money involved?

Chairman.—In the acquisition of this land, the State itself was involved, through the Department of Industry and Commerce, but you want to bring in arbitrators’ awards as between an ordinary vendor and an ordinary purchaser.

Deputy Bartley.—I do not. If I have referred to the practice generally in this matter, it was merely for the purpose of establishing whether or not there is a distinction between ordinary practice in such matters and the very special activities of public Departments in acquiring land for public purposes. The court apparently has decided that there is, because we know, each one of us, that if a man is selling a portion of his land, the almost invariable practice is that he redeems the annuity, if there is such, owing to the Land Commission on the portion which he proposes to sell and then sells the discharged portion to his prospective purchaser. That has not taken place in this case.

Chairman.—That is why it is subject to all this talk.

Deputy Bartley.—It seems to me to be a matter worth noting. I do not want to take on any obligation of instructing State arbitrators in a matter of this kind, but I do think that in this particular case the net result is that something in excess of the market value of the land has in fact been paid, even though the transactions by which it was brought about have involved a decision of the High Court.

Deputy H. P. Dockrell.—We have no evidence before us.

Chairman.—That is the point I am trying to make to the Deputy. The High Court decided that, if the vendor had been made to redeem, he would not have got the fair value of his land. That is all I can assume from the decision of the High Court.

Deputy Bartley.—Let me put it this way: from what I have been told, the arbitrator fixed the value of this land on the assumption that the vendor would have it discharged of all liabilities.

Chairman.—No; the High Court decided the very opposite. That is what I am trying to point out to you. You are assuming that, but a court of this country has decided that that view is wrong.

Deputy Bartley.—We are at cross purposes—there is no doubt about that.

Deputy J. Brennan.—It was a test case.

Chairman. — What are we trying to decide?

Deputy A. Barry.—I think we have no function.

Chairman.—I do not see how we have any function to over-rule the decision or to attempt to suggest that the court was wrong.

Deputy Bartley.—I am not attempting to do that by any means. Will you tell me quite definitely whether I am right or wrong in this assumption, that the arbitrator, in fixing a sum of money for the purchase of this land, fixed it in the belief that the State or the Department of Industry and Commerce was acquiring land in fee-simple, not subject to any payment other than the purchase money?

Chairman.—I do not know a thing about it at all.

Deputy Bartley.—That must be so and it was a test case to decide whether or not he was correct, and therefore your point is that it is a pointer for arbitrators in dealing with public moneys in the sale of State lands. Surely we have a right to do that.

Chairman.—If that is the point, I presume we have a right, but I should have pointed out—I have been very lax in not doing so, but I was too interested in the discussion—that discussions like this take place at our final meeting and not when witnesses are here. We settle our policy among ourselves then, so that you will have a further opportunity at the final meeting, if you wish to raise the matter again. In other words, I am not trying to close it on you in any way, except in so far as this meeting is for the purpose of getting evidence from the Accounting Officer.

Deputy Bartley.—It seems to me that it would be rather a waste of time to raise this question when the expert witnesses were not present.

Chairman.—Have you any question you wanted to ask Mr. Leydon in reference to any matter on which you are not clear?

Deputy Bartley.—I think I put my final question and Deputy J. Brennan seems to understand my point of view.

Chairman.—I understand your point of view, but I do not see how we can get anywhere in face of a court order.

Deputy Bartley.—I am not suggesting that at all. I only wanted to know whether my version of a certain transaction was in fact correct or not—an arbitrator’s assessment of the value of a certain piece of land.

Chairman.—The only way we could find that out would be by asking the arbitrator if he agreed with the court—if they had really given a correct version of his decision.

Deputy Bartley.—Was he not called in as a witness in the proceedings?

Chairman.—You know as much about that as I do. We do not know.

Deputy A. Barry.—We are not competent.

723. Deputy Bartley. — Is there any objection in the rules governing the proceedings of this Committee to my raising this question here?

Chairman.—We have been discussing it for fifteen minutes. I do not see how you can claim that any one is stopping you.

Deputy Bartley. — Very good, Chairman; go ahead.

Chairman.—We will have a further opportunity if you wish to avail of it, and, if you wish, Mr. Leydon can send a note* on all the details. Would it be possible, Mr. Leydon, to get a copy of the arbitrator’s award to see whether it was any different from the usual one?

Mr. Leydon.—There should not be any difficulty in getting a copy of it and sending it to the Committee.

Chairman.—Would you like to see it, Deputy Bartley, so as to satisfy yourself about it? I am only too anxious to see that any evidence on matters on which you are at all doubtful or on which you want to get a perfectly clear picture with regard to what happened, will be available to you.

Deputy J. Brennan.—It strikes me that the point at issue is that heretofore it was not quite clear whether the arbitrator fixed a price including the redemption of the annuity of not. A test case was brought and it was decided that it did not.

Mr. Leydon.—In this particular case.

Chairman. — Yes, in this particular case. I have no evidence to suggest that that all arbitrators put down a certain form of words for sums of money inserted.

Deputy J. Brennan. — The fact of its being a test case would indicate that it was not previously clarified whether it would or not.

Deputy H. P. Dockrell.—It was only a test case in relation to this particular matter.

Chairman.—This particular arbitrator’s award—it does not suggest that all arbitrator’s awards are in question.

Deputy Bartley. — Do you not think that that is rather trifling with the subject? I mean no offence in saying that. If some future arbitration takes place in exactly similar circumstances as those discussed here, will it not be useful to warn arbitrators who will be making awards for payments out of public moneys and put them on the qui vive?

Chairman.—Personally, I should have considered that what had already happened in the Department would put them on the qui vive without this Committee. I take it there is some purpose in referring this matter back to this Committee.

Mr. Leydon.—I wonder would it help your discussion at the final meeting if I sent you a copy of the arbitrator’s award and, if I can get it, a copy of the High Court judgment? I have not seen the judgment in extenso, but maybe it sets out the reasons why the court took that particular view in relation to this arbitration award.

Chairman.—It would help us because at the moment we are rather talking around the subject.

724. Chairman.—Paragraph 80 of the Report of the Comptroller and Auditor General reads:—

“Subhead G. — Constructional Works including Furnishing of Buildings — Shannon Airport.

Subhead H. — Constructional Works including Furnishing of Buildings — Dublin Airport.

Expenditure during the year on constructional works, including furnishing of buildings, at Dublin and Shannon (Rineanna) Airports amounted to £20,055 14s. 2d. and £52,011 11s. 1d., respectively, bringing the total expenditure as at 31st March, 1953, to £1,199,209 19s. 11d. for Dublin Airport and £1,925,769 6s. 6d. for Shannon (Rineanna) Airport, exclusive of expenditure on the acquisition of land.”

Mr. Ó Cadhla. — That paragraph is merely informative.

725. Chairman.—Paragraph 81 of the Report of the Comptroller and Auditor General reads:—

“The terms of a contract dated 9 December, 1948, for the erection of a new control tower at Shannon (Rineanna) Airport following the destruction by fire of the old tower in March, 1948, provided for the payment by the contractor of certain penalties in the event of failure to complete the work by a stipulated date unless an extension was granted by the Minister for Industry and Commerce under conditions specified in the contract. Extensions of the contract period were granted by the Minister from time to time to supplemental agreement under conditions which would not appear to have been covered by the contract and I have inquired as to the circumstances in which these extensions were granted.”

Mr. Ó Cadhla.—The erection of the control tower was regarded as a matter of urgency. Time was a prime factor and the lowest tender, which specified twelve months for the completion of the work, was set aside in favour of a tender which specified five and a half months. The contract was placed in December, 1948, but the work was not completed until July, 1950. A clause in the contract provided for a penalty of £50 for every week’s delay in the completion of the work, but it also enabled the Minister to grant extensions on the application of the contractor if the progress of the work was interrupted by strikes or if the work was delayed by the direction of the architect. It seemed to me that extensions were granted for reasons other than these and I think I should read in full the Accounting Officer’s reply to my inquiry:

“In the course of the contract, unavoidable delays occurred in obtaining steel and other supplies. Difficulties common in the building trade at the time were experienced in securing tradesmen and developments in control and communication services necessitated alterations in the plans for the layout of the building. These factors, all of which were outside the contractor’s control, interrupted the progress of the work and, on the application of the contractor and the recommendation of the architect, successive extensions were granted for the completion of the works. It has been the practice where somewhat similar circumstances existed to grant extensions of time for the completion of contracts and the terms of a contract have not been regarded as precluding extensions for compelling reasons not stipulated in the contract.”

726. Deputy J. Brennan.—The penalty clause was not in fact invoked at all?

Mr. Leydon.—No; it was not invoked.

727. Deputy Bartley.—Was there any corresponding advantage to the contractor if he was better than his contract? There was a penalty clause if he did not do the work within a certain time If he did it in shorter time, was there an advantage to him?

Deputy J. Brennan.—No, except that he would not have to pay the penalty.

Deputy Bartley. — Then the penalty clause was no use.

Deputy J. Brennan.—It was.

Deputy Bartley.—It was not.

Deputy J. Brennan.—If it was invoked, he would have had to pay £50.

Deputy Bartley.—Try it out and see what you get out of it. Unless there is a corresponding clause for the contractor, your penalty clause is useless. Try it in the case of a private contract and see.

728. Chairman.—This brings in a new point. I would like to hear Mr. Leydon or the Department of Finance on the question governing contract forms. Deputy Bartley seems to suggest they are all useless because they do not contain an advantage clause as well as a penalty clause.

Deputy Bartley.—Yes, but I am putting the point the other way: I do not think it is fair to ask Mr. Leydon to answer that now.

Chairman.—Mr. Leydon, you are very intimately connected with contracts?—I can only say that I do not feel fully competent to express any opinion about the validity of a penalty clause if it is not accompanied by what I call a “bonus clause”—that is to say, a bonus for completing the contract in less than the specified time. On the general question of penalty clauses, I think it is common experience that it is extremely difficult to enforce them. I might say, perhaps, that this took a very long time. I concede that at once. It took a very long time to complete this contract—not quite two years. Our senior airport architect said that in dealing with contracts it is customary to take into consideration special circumstances and unforeseen variations. These often lead to differences of opinion with the result that it is practically impossible to obtain a clear-cut case for enforcing the penalty clause. He reports that so far as he is aware the penalty clause has never been enforced by this Department, nor has it been enforced by the Department of Health or the Office of Public Works since the last war. Due to the general instability of the markets in the post-war years the value of the penalty clause has been negligible and he knows of no case where it has been enforced either by private individuals or by a Government Department. The difficulty of deciding that the time taken for the completion of a contract has been exceeded only through the fault of the contractor and that the penalty clause should be enforced is so great as to make it easily understood why penalty clauses are so rarely enforced. We would all be in favour of penalty clauses if they could be enforced but we are advised that we have not much prospect of winning.

729. Chairman.—What worries me is that time was the essence of the contract and that the successful contractor did not offer the lowest tender. Now the work, on your own admission, was delayed and the outcome shows that penalty clauses are useless and cannot be enforced. For that reason I am satisfied that the time specified in such contracts does not matter a jot. Is it not time to ignore “time” in such contracts altogether and just accept the one that is lowest?

Deputy J. Brennan.—Ignore the penalty clause?

Deputy Bartley.—The penalty clause presupposes that time is the essence, but such clauses are not enforceable. I suggest that this should be inquired into. I do not think penalty clauses are enforceable unless there is a corresponding advantage to the contractor.

Chairman.—That is a legal point. I do not know how we could settle that.

Deputy Bartley.—You will find it has grown up through practice.

Deputy J. Brennan.—Would you not think that in this case, since the contractor was not punished with the penalty clause for reasons other than those stipulated in the contract the penalty clause should have been invoked by the Department and the onus put on the contractor of proving that it should not have been invoked against him.

Deputy Bartley.—I take it that the Department in that case very wisely examined all the advice it got and came to the conclusion that the penalty clause could not be enforced. Those responsible decided then to cut their losses and not incur further expenses in pursuing will-o’-the-wisps.

730. Chairman.—At the moment we are taking evidence, not expressing opinions. Deputy Bartley would be quite right in asking Mr. Leydon if that is what happened. I would myself be interested to know whether when extensions are granted, like this, the Department of Finance is consulted?—Not as a rule, no. It rests entirely with the architect under the contract and that is the standard practice, as I understand, in connection with building contracts. May I go back a moment because there is one point that has been mentioned twice here and I would like to give you the facts on it clearly. It has been stated that this was not the lowest tender. That is quite true, but the difference was only £308, to be exact, on a contract which was nearly £14,000; that is the difference between the tender that was accepted and the lowest tender. The time element then was five and a half months in the case of the tender we accepted and twelve months in the case of the lowest tender. It was eighteen months for the second lowest. Now there are various factors which have to be taken into consideration in looking at tenders of this kind. One is the standing of the contractor and the question whether he can reasonably be relied upon in the experience of the architect to carry out his undertakings and obligations. This particular contractor is a firm of very high standing and repute. The firm had in fact done a lot of work and, as it happened, was doing work on Shannon Airport at the time. Now one value of the penalty clause is that it enables you to put pressure on the contractor and, in the course of the discussions about the extension, pressure was certainly put on him; he was told he had to give top priority to this particular job even though that meant postponing or delaying other contract work on which he was engaged at the airport. It is easy to forget these things in 1954, but at that particular time there were still difficulties in getting supplies and difficulties in getting skilled labour; the architect had to recognise these difficulties with which the contractor was faced. As a layman, just looking at the matter in the light of one’s general experience of litigation and what can be done by a skilful lawyer in court, I do not think there would be an earthly chance of getting a verdict in court against the contractor in view of the facts which were known to the Department and the contractor as to the difficulties he was up against.

Deputy A. Barry.—What does emerge now is that the lowest tenderer was obviously more aware of the difficulties than was the architect or the successful tenderer.

731. Chairman.—On the general question, I think that at some time your Department or the Department concerned with contracts would have to put down its foot and take some sort of action or else consider re-wording the contracts. This is only one of the Departments of State which gets involved in contracts and it might be useful from the Committee’s point of view if we asked the Comptroller and Auditor General to make inquiry generally throughout the Service where contracts of this type are entered into to see if anything can be elicited, particularly in regard to Deputy Bartley’s bombshell in relation to the validity of the general type of contract and of the penalty clause.

Deputy J. Brennan.—One would at least expect that the particular clause in the contract would be relieved of any ambiguity to preclude one contractor from taking an unfair advantage of another with ultimate loss to the State.

Chairman.—Does the Committee agree that it would be useful if the Comptroller and Auditor-General had a review of this matter made, bearing in mind Deputy Bartley’s point in particular.

Deputy Bartley.—The penalty clause is so old that it has become merely a matter of form and the courts will not enforce a penalty clause as such. If one could prove that the contractor stood to gain a corresponding advantage, then one would have some chance of imposing a penalty clause. It is not an abstruse legal point. It is something that has grown up through practice.

Deputy A. Barry.—Have there been judgments on that in the past?

Deputy Bartley. — There have been judgments against people who sought to enforce this clause. The facts and circumstances outlined by Mr. Leydon have been taken into account with the result that almost invariably the penalty clause action has been thrown out. As the Chairman says, the form of the contract is something that really requires examination.

Chairman.—Mr. Ó Cadhla will have an examination made into this whole matter.

732. Chairman.—Paragraph 82 of the Report of the Comptroller and Auditor General reads:—

“Alterations costing £3,015, to provide improved facilities for passenger traffic at Dublin Airport, were carried out by Aer Rianta, Teoranta, the company entrusted with the management of the airport. The contract was placed on a time and material basis and I inquired whether competitive tenders had been invited. I was informed that tenders were not sought as the Department regarded Aer Rianta as being in a better position to carry out, economically and conveniently, structural alterations in areas of the terminal building which are in continuous use by passengers and the public than outside contractors who would be unfamiliar with the construction of the building and the services of the airport. All works carried out by Aer Rianta for the Department were on a time and material basis as the maintenance organisation of the company was not equipped for preparing estimates on a competitive basis for lump sum contracts. The normal procedure of preparing detailed plans and specifications for the purpose of a lump sum contract was not adhered to as variations in plans were expected to arise as the work progressed owing to the nature of the alterations in question.

A sum of £2,000 was paid to Aer Rianta in the year 1952-53 in respect of work done under this contract and is charged to subhead H.”

Mr. Ó Cadhla.—Your Committee, Mr. Chairman, has always looked with disfavour on “time and material” contracts because the incentive to economy is lacking; but in this particular case there is an organisation for the maintenance of the airport, which is maintained from public funds, and, if the management is reasonably efficient, one would expect that minor capital works could be carried out as economically as by public contract.

Mr. A. Barry.—Is there a limit?

Mr. Ó Cadhla.—Not at the moment, but Aer Rianta, Teoranta, should be able to carry out these works as efficiently as an outside contractor. I think the biggest work undertaken on a “time and material” basis runs to about £8,000.

733. Chairman.—You get Department of Finance sanction for this, Mr. Leydon? — Oh, yes. These particular matters, as it happens, are handled by a committee which is called the Airport Construction Committee and that committee includes representatives of the Department of Industry and Commerce, the Department of Finance, the Department of Defence and the air company itself so there is very full and free discussion and the Department of Finance has the fullest information as to what is happening in all these cases and the reason for adopting a particular course.

734. There are two points I would like to make. One is that if the maintenance staff have time to carry out these new works there seems to be a possibility of redundancy. That staff seem to be able to carry out quite considerable new works. The second point is that I do not know why the State pays this company this sum of £2,000. After all, there is included in the Extra Receipts payable to the Exchequer a receipt from this company in respect of a surplus on the management of Dublin Airport (1951-52) amounting to £19,595. Now the profit on this transaction presumably goes into that. I take it that in their accounts they would, as a matter of book-keeping, show a profit on these transactions?—I do not think there would be a profit element in this. If there was a profit it would come back to the benefit of the Exchequer. There would not be any point in building up a profit element in this. The Department own the Airport and is responsible for the cost of maintenance and for any capital expenditure, and I think there is provision in subhead H.— Constructional Works, including Furnishing of Buildings, Dublin Airport—for expenditure of that kind. I would have to defer to my colleagues from the Department of Finance in this, but I think they would handle it in that way. If the sum of the £3,000, which had been spent by way of capital expenditure on the Airport, was offset pro-tanto against the payment due from the management of the Airport, which is a different thing altogether, this expenditure would be concealed and I might find myself answering a very different set of questions here. I doubt whether it would be regular to do that. The £3,000 is a charge against subhead H.

Mr. Ó Cadhla.—It would be merely a book-keeping transfer.

Mr. Leydon. — Then it would not appear at all.

Mr. Ó Cadhla.—If you received £3,000 less, it would be a simple book-keeping entry to debit subhead H. and credit Appropriations in Aid.

Mr. Leydon.—This is a Department of Finance question. We would have to show the regular charge on the subhead which provides for the expenditure of that amount.

735. Chairman.—I have some information here which seems to show that there is a profit element in this transaction, which would look as if part of the receipts of the management of Dublin Airport, the profit, was due to this constructional work, which you say is the Department’s function. It would be a fractional amount only?—If there is a profit, it has to go back to the Exchequer.

736. It is coming out of the Exchequer’s own money. The Department pays Aer Rianta, Teoranta, for this constructional work, on which there is a profit, which is handed back in the Appropriations in Aid?—I will look into that point.*

737. Would you also look into the point that the maintenance staff might be a bit overloaded?—Yes.

Deputy J. Brennan.—Is it possible to have extra staff on those constructional jobs?

Deputy Bartley.—You say it is a time and materials contract. How is that arrived at.

Chairman.—They allow a percentage on wages.

Mr. Ó Cadhla.—There is 27½% added to the wages bill and 15% to the materials bill, presumably to cover overheads.

Deputy A. Barry.—There was mention of a permanent engineer being there. Is portion of his reward charged against that job?

Mr. Ó Cadhla.—I presume so. I presume he is covered by that percentage.

Deputy A. Barry.—It raises a very big and fundamental question.

738. Chairman. — It raises the point that the accounts of the Shannon Airport and Dublin Airport are quite different; they are not presented in the same way? —Shannon Airport is controlled directly by the Department and its finances are filtered through the Department’s Vote. Dublin Airport is managed by the Aer Rianta, Teoranta, on behalf of the Minister.

739. Your accounts show in the Appropriations in Aid the receipts from Shannon Airport, but there is no clear picture obtainable from the accounts as to whether or not Shannon Airport showed a profit or a loss on management? —It does not appear in the Appropriation Accounts, I quite agree, but we have the figures. Also, I would like at this stage to say that if you think you are getting a clear picture from the accounts about the management of Dublin Airport, you are not.

Chairman.—I really did not think that either of them was quite satisfactory. Do you not think that some change might be made in the accounts which would show the expenditure on Shannon separately, so that Deputies would have an opportunity of comparing the receipts at Shannon, which are shown, with the expenditure? — I am speaking with some diffidence and would like to hear Mr. Ó Cadhla on it. It would involve preparing a new set of accounts altogether. You would have to make provision for the expenditure on the one hand and for the revenue. You would have to throw up an operating deficit and then have an endless argument as to what provision to make for depreciation, interest, maintenance, pension liability, and so on. While I feel these things should be brought into account, there is room for a certain amount of argument in regard to the elements of these computations. It might mean that in Dublin in 1952-53, this year in which the Airport Management Account shows a handsome surplus which is turned into the Exchequer on this basis of computation for 1952-53 the deficit would be £187,779. Dublin Airport brings in a lot of services which are outside the scope of the Airport management altogether. There are radio services, meteorological services, air traffic control and so on, which are part and parcel of the running of the Airport but they are direct State services. Then when you go into the question of meteorological services you start a fresh line of argument. You find the argument will be put up, and it has been raised in connection with landing fee to aircraft companies that the benefit from the meterological services is not entirely for aircraft or air lines but to the farmers and the rest of the community also. There is room for a great deal of argument about this kind of thing. We tried to get a picture of what these services are really costing. I would hate to leave the Committee under the impression that we are making a profit running Dublin Airport. I am afraid we are not, and never will, on this basis, and I doubt whether any airport in the world ever will, except where there is scope for a tremendous income from concessions and shops.

740. We get some income from Shannon Airport on that basis?—We are making a good profit in some directions at Shannon, but the services are very expensive.

741. Chairman.—I am sure the Committee will be willing to be guided by Mr. Ó Cadhla, if he is satisfied with the present arrangements?

Deputy A. Barry.—I think the matter should be reduced to a more concrete arrangement. It should be possible to devise a simple accounting system to show whether there is a profit or a loss. It is not easy for us to see it now?— I do not know what Mr. Ó Cadhla thinks, but it would not do to leave the Committee under the impression that this is easy. We keep separate accounts for the catering services at Shannon. There again there is difficulty. There could be a lot of argument about the rents to be charged for the catering services. Those arguments go on for years.

742. Chairman.—But there are precedents in other services and in other State Departments? — The airport authorities in various countries do not always agree about some of these things.

Mr. Ó Cadhla.—I think the Committee would be satisfied if Mr. Leydon supplies just the figures that are included in the annual Appropriation Account, the receipts and the running expenses.

743. Deputy A. Barry.—Could we not have a true paper balance?

Mr. Ó Cadhla.—I think the presentation of a balance sheet would present great difficulties.

Deputy A. Barry.—It would let us see what we are getting?

Deputy J. Brennan. — Including the Airport separately.

Mr. Ó Cadhla. — Yes—by abstracting from the Appropriation Account the amounts pertaining to the various Airport services.—We have done that and there was a question answered in the Dáil not very long ago on Shannon Airport, taking in what we would regard as a reasonable charge for the operational side, that is, the State services, or required in the operation of air lines, and also putting in provision for the interest, depreciation and pension liability to the staff. If you like, we would discuss that with Mr. Ó Cadhla.

Chairman.—I think that would be the best way. There are many facets and angles.

Deputy A. Barry.—It is a new thing, of course.

Chairman.—It is a difficult question. We will go into it with the Comptroller and Auditor General’s staff.

744. Chairman.—Paragraphs 83 and 84 of the Report of the Comptroller and Auditor General read:—

“Management of Dublin Airport.

83. The accounts of Aer Rianta, Teoranta, for the year 1951-52 revealed a surplus of £19,595 on the management of Dublin Airport. This amount was received from the company and is brought to account as an Exchequer extra receipt.

The Airport management account for the year ended 31 March, 1953, showed the total revenue from the management of Dublin Airport, including £69,627 for landing fees, £38,625 for rents receivable and £5,965 for profit on catering, to be £121,917. The total expenditure amounted to £96,920 leaving a surplus of £24,997 on Airport management, which has, I understand, been surrendered to the Exchequer in 1953-54.

Catering Service—Shannon Airport.

84. Reference was made in paragraph 74 of the report on the accounts for 1951-52 to the position regarding the completion of an inventory of furniture and equipment supplied to the catering service. A comparison of the results of stocktaking with the inventories of items supplied disclosed deficiencies to the amount of £840 3s. 5d. These were attributed mainly to defective records and have been written off with the sanction of the Department of Finance. The stocktaking also revealed surplus items valued at £2,715 17s. 6d., which have now been taken on store charge. With the exception of articles valued at £176 14s. 0d., which were purchased direct by the catering controller, these surpluses were also attributed to accounting errors.”

I take it that paragraph 84 refers to the winding-up of the previous inquiries?

Mr. Ó Cadhla. — Yes, the position is now quite satisfactory.

Mr. Leydon. — Thank you, Mr. Ó Cadhla. It might be of interest if I had an opportunity of reading the whole file on this. Some of these discrepancies arose from what may be called faulty description; for example, the fact that amongst the list of deficiencies we had “one trolley, baggage, chrome, £18 6s. 8d.” and we had in the surpluses “one rack, baggage, chrome, £18 6s. 8d.” We had a “refrigerator, ice-cream freezer,” amongst the deficiencies and a “refrigerator, cupboard type,” amongst the surpluses. We had about £500 worth of deficiencies which turned out to be glasses and cups and saucers, and I think we all know what happens to them.

745. Chairman. — The stocktaking is now under a better system?—Yes, it is under better control now.

Deputy A. Barry. — It is taken regularly? There is no lag in the stocktaking?

Mr. Ó Cadhla.—No. The stocktaking is up to date.

746. Chairman. — On subhead S. — Appropriations in Aid — your receipts show a healthy trend at Shannon Airport. Has it been continued?—Yes.

Deputy A. Barry.—The receipts from the catering service show an extraordinary expansion, which is not quite on the same graph line as the other increases. It goes from £3,500 to £22,000.

Chairman.—There were arrears to be paid in respect of previous years.

Mr. Leydon.—There is another factor in connection with the catering service. That service is responsible for the shop and duty-free sales, and that side has been developed very substantially in the last few years.

747. Deputy H. P. Dockrell. — I see under subhead G.—Constructional Works, including Furnishing of Buildings, Shannon Airport — that no expenditure was incurred on the provision for a new launch? — It is under construction, and the contract has been placed for it.

VOTE 53—INDUSTRIAL AND COMMERCIAL PROPERTY REGISTRATION OFFICE.

Mr. J. Leydon further examined.

748. Deputy H. P. Dockrell. — I see that fees for patents increased. Was there any explanation for the increase of just over £3,000, from £17,000 to £20,000?— I am afraid I could not give an explanation. There were more applications, I expect.

VOTE 72—TOURISM.

Mr. J. Leydon called.

749. Chairman. — Paragraphs 110 and 111 of the Report of the Comptroller and Auditor General read:—

“Section 15 of the Tourist Traffic Act, 1939, provided for the payment to the Irish Tourist Board of non-repayable grants within an annual limit of £45,000. The Irish Tourist Board was renamed An Bord Fáilte by Section 4 of the Tourist Traffic Act, 1952, which became law on 3 July, 1952. Section 10 of this Act empowered the Minister for Industry and Commerce, with the consent of the Minister for Finance, to pay an Bord, out of moneys provided by the Oireachtas, such non-repayable grants, not exceeding in the aggregate £250,000 in any one financial year, as it should from time to time require. The amount issued out of the Grant-in-Aid for tourist development under these authorities was £60,000 (subhead A.).

Section 33 of the Tourist Traffic Act, 1952, gave statutory authority for the establishment of Fógra Fáilte for the purpose of engaging in tourist publicity. Section 35 of the Act empowered the Minister for Industry and Commerce, with the consent of the Minister for Finance, to pay to this body, out of moneys provided by the Oireachtas, such non-repayable grants not exceeding in the aggregate £250,000 in any one financial year as it should from time to time require. The amount of the Grant-in-Aid issued to Fógra Fáilte was £150,000 (subhead B.).”

These figures are for information?

Mr. Ó Cadhla.—Yes.

Chairman.—Thank you, Mr. Leydon.

The witness withdrew.

VOTE 5—COMPTROLLER AND AUDITOR GENERAL.

Mr. C. O’Neill called and examined.

750. Deputy H. P. Dockrell.—On subhead A.—Salaries, Wages and Allowances —I see that the savings were due to absences on sick leave without pay. Surely that is rather surprising? — We had two officers who were on very extended sick leave, a matter of years. They got the full spell of sick leave allowed and then had to go on a period without pay.

751. Chairman. — On subhead D. — Appropriations in Aid — I presume the audit fee mentioned came in in the course of the following year?—Yes, it came in during the following April.

The witness withdrew.

Chairman. — That concludes the evidence which we will take. I would like to thank the Labour Party for the manner in which they have facilitated the Committee by allowing us to use one of their Committee Rooms for our meetings. The House is suffering from a shortage of rooms, and we are grateful to the Labour Party for vacating a room in our favour on several occasions.

The Committee adjourned.

* See Appendix XVII.

* See Appendix XX.

* See Appendix XVIII.